Overpay mortgage or other investment?

adonis10

atush wrote: »

It depends on what you invest in- passive, active, shares etc. A FTSE fund, being all UK, is higher risk than global ones. Some pensions are better than others for each..

Vanguard LS 80 and 100 at the moment. Do not know enough to branch out on my own.

atush wrote: »

You ARE chipping away at the mtg- by 200/month?

Not overpaying at the moment.

atush wrote: »

You coupld add a lump sum to your pension to 'catch up'.

And yes, as ECO says, you could transfer your cash ISA to a S&S isa.

Cash ISA has gone.

adonis10

atush wrote: »

what rate do you pay on student loan? Might not make sense to overpay?

1.25%. Agreed it may not make sense but it is still a chunky liability which will not go away otherwise, especially when rates rise. In 5 years I could find myself paying 5% on 13k. I don't miss the £100/month at present.

atush wrote: »

Your pension contribs look good right now, i'd concentrate on S&S isas? Unless you are paying HRT? You could put most/all of any bonuses into the pension?

Not paying HRT. Work for a charity so no bonus for me


I may just keep it as it is and focus on S&S ISA.

fiisch

Interesting read - thought I'd add my two penneth... You and I are somewhat similar in a lot of ways, and very different in others.


I am 31, prior to last year I had precious little retirement savings, and I suspect our household incomes are similar. However, I'm married and have a 15 month old in tow, and have never had a huge amount of savings to speak of, with fast cars being a particular vice of mine.


Pensions have only recently been a focus for me (I distinctly remember being about 25 and thinking "silly ****er" when a fellow new starter in a company training session of about 55 years old tried to preach the benefits of paying extra into a pension during the pension presentation). I now pay 21% (6% e'ee, 15% e'er) which equates to about £1k / month, but I'm still not yet at the £20k mark.


However, I benefit from HRT relief, and I'd caution against putting too much emphasis on a pension. I could get additional HRT relief and not have to repay child benefit if I was to up my contributions, but you also have to look after the here and now. I also think Student Loan overpayments are - frankly - madness in your shoes. The contribution taken from your salary each month must still be small enough not to make a notable difference, and you can put that money to much better use.


If I were you - and I think I'm much of a risk taker, or even a gambler - I'd gear the pension back slightly and stop the student loan overpayments. Instead, I'd be splitting my extra cash between mortgage overpayments and S&S ISA contributions (VS100). This means you're building up equity in your home, improves the LTV faster, and if your circumstances change and you do want a bigger home will put you in a better position.


Meanwhile, the VS100 can be allowed to grow which will ultimate supplement your retirement savings. Although you won't be getting tax relief, this fund can be used to supplement your retirement income, but with the added flexibility of not having to wait until your 55 (hey if things really work out, you may want to retire before 55!).


Just my 2 cents - that is what I'd be doing (and indeed do!).

adonis10

fiisch wrote: »

Interesting read - thought I'd add my two penneth... You and I are somewhat similar in a lot of ways, and very different in others.


I am 31, prior to last year I had precious little retirement savings, and I suspect our household incomes are similar. However, I'm married and have a 15 month old in tow, and have never had a huge amount of savings to speak of, with fast cars being a particular vice of mine.


Pensions have only recently been a focus for me (I distinctly remember being about 25 and thinking "silly ****er" when a fellow new starter in a company training session of about 55 years old tried to preach the benefits of paying extra into a pension during the pension presentation). I now pay 21% (6% e'ee, 15% e'er) which equates to about £1k / month, but I'm still not yet at the £20k mark.


However, I benefit from HRT relief, and I'd caution against putting too much emphasis on a pension. I could get additional HRT relief and not have to repay child benefit if I was to up my contributions, but you also have to look after the here and now. I also think Student Loan overpayments are - frankly - madness in your shoes. The contribution taken from your salary each month must still be small enough not to make a notable difference, and you can put that money to much better use.


If I were you - and I think I'm much of a risk taker, or even a gambler - I'd gear the pension back slightly and stop the student loan overpayments. Instead, I'd be splitting my extra cash between mortgage overpayments and S&S ISA contributions (VS100). This means you're building up equity in your home, improves the LTV faster, and if your circumstances change and you do want a bigger home will put you in a better position.


Meanwhile, the VS100 can be allowed to grow which will ultimate supplement your retirement savings. Although you won't be getting tax relief, this fund can be used to supplement your retirement income, but with the added flexibility of not having to wait until your 55 (hey if things really work out, you may want to retire before 55!).


Just my 2 cents - that is what I'd be doing (and indeed do!).

Thanks, interesting inputs.

No chance of HRT relief for me so can ignore that.

Take your point about the student loan but it has to be paid at some point (don’t think I’ll get to 65 before paying it) and the more I add to my pension the less I pay off the loan through PAYE. It is only 1/8 of my surplus so I don’t miss it. I’ve got circa 220k equity at present so no huge rush to increase that hence the loan overpayments. Other than mortgage, I really dislike debt and would rather be rid of it, whilst not feeling much impact from the overpayments in terms of my lifestyle.

I’m heavily weighted towards VLS 80 at present so may start to put more in 100 to take a bit more risk given that I have a lot of time until retirement.

kidmugsy

adonis10 wrote: »

Take your point about the student loan but it has to be paid at some point

Not necessarily. Anyway, read the Martin Lewis explanation of why a student loan isn't a loan in the conventional sense.

1.25%? Pah! What does your mortgage loan cost you? It really is a loan in the conventional sense.

Why not bung the money instead into current accounts and regular savers that pay 5% p.a.? Pure profit.

adonis10

kidmugsy wrote: »

Not necessarily. Anyway, read the Martin Lewis explanation of why a student loan isn't a loan in the conventional sense.

1.25%? Pah! What does your mortgage loan cost you? It really is a loan in the conventional sense.

Why not bung the money instead into current accounts and regular savers that pay 5% p.a.? Pure profit.

Sorry, I think it is 1.5% not 1.25%.


I have all the 5% accounts so now there are only 1.5-3% ones left. Let's say I pay £1,200 extra a year, I'll lose out on £18/year (3% credit interest less student loan interest payable). Yes, it is profit I am not making but it is such a small amount that I would rather the peace of mind of the loan going down.


Mortgage is 2.14% so marginally more (£7.68 in £ terms - not worth worrying about).


Don't forget, there is always the chance that a future government will sell the loan book and the interest rates will rise dramatically. Probably won't happen but it is one more cash cow that a government could milk.

Wobblydeb

My tuppence is that your pension provision is the one thing out of line in your finances. Yes, you contribute a lot now, but you missed some of the early years. By moving a chunk of cash into a SIPP you can benefit from the additional 25% paid in by government and give yourself the benefit of compounding. I understand that having a nice cushion of cash is comforting but it will not match investing in the markets over the long term.

DairyQueen

Wobblydeb wrote: »

My tuppence is that your pension provision is the one thing out of line in your finances. Yes, you contribute a lot now, but you missed some of the early years. By moving a chunk of cash into a SIPP you can benefit from the additional 25% paid in by government and give yourself the benefit of compounding. I understand that having a nice cushion of cash is comforting but it will not match investing in the markets over the long term.

I agree. I have yet to hear of anyone in their 50s who regretted having stashed as much as possible into their pension when in their 20s/30s. Ditto ridding themselves of their mortgage asap. Time is the big factor in the pensions investment universe. The more you stash into a pension now, the more tax benefit you will receive, and the more options/security you will have in 20 years.

I know it's difficult to imagine your 50-something self but, believe me, they will thank you for your foresight. Equities are king at your age and VLS 80 or 100 is as good as any fund for a 30-something investor who has no wish/understanding to seriously DIY.

atush

Don't forget, there is always the chance that a future government will sell the loan book and the interest rates will rise dramatically. Probably won't happen but it is one more cash cow that a government could milk.

While possible, not probable. Due to the whole electoral suicide thing.

enthusiasticsaver

Upping your pension contributions is a good way to go considering you started late. We always used a rule of three for any spare money we had. One third was short term savings for holidays, Christmas, car maintenance, house maintenance. Any annual surplus went to medium term savings. One third was medium term for replacement car, bigger house, larger more expensive holiday or home improvement project like new kitchen, windows or bathroom and children's university costs. The final third was long term so when we had a mortgage we put half towards overpaying it and the other half was increased pension contributions. Eventually I also started s and s isas but should have done them earlier.